Why Wal-Mart Is Worried About Amazon?

Five years ago, the world’s largest retail chain didn’t have to worry much about the world’s largest online mall. Only about a quarter of Wal-Mart Stores (WMT) customers shopped at Amazon.com (AMZN), according to data from researcher Kantar Retail. Today, however, half of Wal-Mart customers say they’ve shopped at both merchants. That’s leaving the mega-retailer—which long ago bested local brick-and-mortar merchandise stores and supermarkets across America—with a massive online competitor that is too tough to ignore.

Threatening Wal-Mart’s dominance are two trends: The discounter’s traditional customers—bargain hunters making less than $50,000 a year—are getting more tech-savvy, and more-affluent shoppers who began frequenting Wal-Mart during the recession are returning to Amazon as their finances improve. Amazon has moved into merchandise categories that Wal-Mart traditionally has sold, from diapers to vacuum cleaner bags. In its last fiscal year, Amazon posted 41 percent revenue growth, to $48.1 billion, vs. 8 percent at Wal-Mart. The chain’s 2011 online sales amounted to less than 2 percent of its $264 billion in U.S. revenue, says Kantar. “Amazon is always in our sights,” says Jeremy King, chief technology officer at the retailer’s @ WalmartLabs skunkworks in Silicon Valley. “My biggest issue is playing a catch-up game.”

In the last year Wal-Mart has increased its investment in its online business. The company has spent more than $300 million acquiring five tech firms since May and hired more than 300 engineers and code writers in the U.S. and India. Wal-Mart is also launching a program to allow the 20 percent of its customers without credit cards or bank accounts to make online purchases.

Wal-Mart’s acquisitions include Kosmix, a social-media firm, and iPhone app creator Small Society. The company hopes the newcomers can find a way to stop shoppers from engaging in scan and scram. That’s when would-be customers use their smartphones in stores to scan an item’s bar code and then buy it online from a rival merchant. The chain’s tech team also is working on a concept called Endless Aisle, which would let shoppers immediately order from Walmart.com via smartphone if an item is out of stock. “You can’t ask people to leave their phones at the door. So you have to give them value and an experience,” says Venky Harinarayan, @WalmartLabs’ senior vice president of global e- commerce. The former Amazon executive joined from Kosmix.

Wal-Mart is trying to improve links between its store inventory, website, and mobile phone apps so that more customers can order online and pick up their purchases at stores, which half of Web customers do already. Wal-Mart is trying Web-based shopping tactics, like its Pay With Cash program for Wal-Mart customers who don’t have credit cards. The new program allows them to reserve products online and pay cash at their nearest store. To cater to its affluent customers, Wal-Mart is selling more expensive items—for example, high-end televisions from Sony (SNE) and Samsung—only online.

Harinarayan’s team is also trying to tackle a new problem for Wal-Mart. Last year the chain was the No. 1 destination for holiday shoppers, with 53 percent of U.S. customers visiting its stores. That was down from 59 percent the year before. To lure gift shoppers, the techies have developed a Shopycat feature that scans the social media preferences of a consumer’s Facebook friends and suggests gift ideas sold on Walmart.com. About 150,000 users have installed the app.

To roll out more such innovations, Wal-Mart must improve its in-house e-commerce technology, so King will hire 87 engineers and coders to bolster the links between the stores and the website. “We’re starting from scratch to build a foundation,” says the EBay (EBAY) veteran. “Ideally, we’d have this platform built a couple of years ago.”

 

The bottom line: Wal-Mart, which gets less than 2 percent of its U.S. sales online, aims to bolster its technical capabilities to compete with Amazon.

 

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The Rise in Retail Theft

When the economy improves – and no matter how stagnant the recovery has been, 2010 was a better year than 2009 – you’d expect shoplifting incidents to decrease. The better off people are, the less incentive they have to steal.

According to a new report from the National Retail Federation (NRF), however, “shrinkage”  – the industry term for inventory loss due to shoplifting, employee theft, paperwork errors and supplier fraud – actually rose in 2010, to 1.58% of all retail sales, from 1.44% of all sales in 2009. In dollar terms, shrinkage cost U.S. retailers $37.1 billion in 2010, versus $33.5 billion in 2009, a 10.7% jump.

Consumers bear the brunt of this cost. “We need to be concerned,” says Richard Hollinger, a University of Florida criminologist who conducted the NRF-sponsored study. “We all pay for it. This theft amounts to an involuntary tax to compensate retailers for crimes that take place in their stores.”

So what’s causing the surge in stealing? First off, America still has a chronic unemployment problem, and as benefits run dry, people get more desperate. But Hollinger attributes a chunk of the worsening problem to more organized retail crime rings. “Shoplifting used to be an individual thing,” says Hollinger. “Now, groups are stealing in large quantities, and it’s a global enterprise.” According to another NRF survey, 94.5% of the 129 retail companies questioned say they have been victimized by organized retail crime over the past 12 months, the most in the survey’s seven-year history. Technology makes the trade more lucrative: criminals can lift items and easily move them on auction sites like EBay.

Law enforcement is keying in on the issue.  In Phoenix, for example, 36 people were arrested in February for their alleged participation in a retail crime operation. The name of the police effort: Operation Orange Crush.

America’s stores need more of these stings.

Make-up and marketplaces are tops for beauty and apparel shoppers.

In March, eBay came out on top for traffic to beauty and apparel retail sites while Mary Kay was No. 1 for time spent, Nielsen Online reports.

eBay was the traffic winner despite posting a 44% traffic decline. 6.5 million shoppers visited eBay Clothing, Shoes and Accessories last month, Zappos was second in line with 5.2 million visitors, a 55% increase from a year earlier.

Visitors to Mary Kay spent on average a whopping 2 hours and 23 minutes on the make-up site—far longer than Avon, which ranked No. 2 with nearly 50 minutes.

The top 10 online apparel and beauty shopping destinations in March with unique visitors in millions this year compared to a year earlier and the percent change, according to Nielsen Online were:

* eBay Clothing Shoes & Accessories, 6.57,11.64, -44%
* Zappos.com, 5.23, 3.38, 55%
* Victoria`s Secret, 4.89, 4.20, 16%
* Avon 3.94, 4.20, -6%
* Lands’ End, 3.88, 3.47, 12%
* The Gap, 3.81, 2.38, 60%
* Old Navy, 3.54, 3.36, 5%
* eBay Jewelry and Watches, 2.72, 4.81, -44%
* L.L. Bean, 2.48, 2.70, -8%
* Shoebuy.com, 2.25, 1.94, 16%

Unique visitors count only once each shopper who came to a site, no matter how many times the shopper visited. This is a custom list compiled by Internet Retailer of the top e-commerce sites in this category based on Nielsen Online data. Rankings may contain multiple web sites from the same retailer or manufacturer.

By length of visit, the top 10 apparel and beauty sites in March (hours:minutes:seconds), according to Nielsen Online, were:

* Mary Kay, 2:23:10
* Avon, 0:49:58
* Lane Bryant, 0:30:17
* Woman Within, 0:18:49
* Blair.com, 0:18:25
* OneStopPlus.com, 0:16:30
* Victoria’s Secret, 0:16:24
* Sierra Trading Post, 0:15:11
* DavidsBridal.com, 0:14:45
* eBay Clothing Shoes and Accessories, 0:14:04

The top eight consumer goods industry segments in terms of online ad impressions (in millions) in March, according to Nielsen data, were:

* Food & Beverage, 3,490.70
* Personal Care, 3,354.67
* Print Publishing, 1,159.02
* Home & Garden, 985.01
* Apparel & Jewelry, 685.80
* Automotive Supply, 417.50
* Toy & Hobby, 150.57
* Recreational Gear, 146.14

Marks & Spencer bids to boost sales with ‘discount vouchers’

Marks & Spencer has distributed almost one million “discount vouchers” in an attempt to boost sales ahead of next month’s trading update.

The retailer is repeating a “families and friends” promotion it ran for the first time last February. More than 70,000 staff have been sent a dozen vouchers, offering 20pc off clothing, food and homewares. Staff have been asked to give the vouchers to friends and families, although in February a number were sold on eBay.

“It was a very well received promotion,” said an M&S spokeswoman.

The vouchers are valid for use between next Thursday and Saturday. M&S’s first quarter finishes at the end of the month.

The promotion is likely to spark renewed fears about current trading at M&S. The retailer is also running a promotion on champagne and wine, as well as offering 30pc off furniture.

Sir Stuart Rose, executive chairman of M&S, is due to update investors on first-quarter trading at the retailer’s general meeting in July.

Like all retailers, M&S has been hit hard by a downturn in consumer confidence. Recent reports have also claimed that Debenhams and Next are winning back market share lost to M&S in recent years.

“We expect market conditions to remain difficult for the foreseeable future,” said Sir Stuart in May when he announced full-year results.

M&S shares have almost halved over the past 12 months, despite the group reporting profits of more than £1bn. The shares closed little changed yesterday at 342p.

Retail Theft Up But Is Bad Economy The Cause?

A record number of retailers–85%–say that they’ve been victims of organized retail crime in the past 12 months. That’s up 6% since 2007.

Is this a Jean Valjean effect? In other words, is the tough economy driving shoplifting and organized retail theft? Or is this the result of increased accessibility of online resale markets and consumers willingness to buy from non-traditional third party merchants?

According to the NRF, nearly two-thirds (63%) of retailers experienced an increase in online resale of stolen items or “e-fencing” during the past 12 months. Maybe this illegal online market is booming because consumers are now comfortable with buying from eBay or unknown merchants if the price is right.

Whatever the reason, the result is a pricey problem for stores. Retailers spend approximately $230,000 per year on labor costs to fight organized retail crime each year. Some large retailers who have been directly affected by retail theft can spend upwards of $1 million a year to counter those kleptos. That’s a significant sum particularly in a tight spending market.

Retailers Among Fortune’s ‘Best Companies’

China Store Age, January 2008

Wegmans, Starbucks and Whole Foods were among the retailers featured on Fortune’s 2008 “100 Best Companies to Work For” list. Other retailers that made the list include Nugget Markets, eBay, The Container Store, Stew Leonard’s, Recreational Equipment, Nordstrom, CarMax and Publix.

Out of the retailers listed, Wegmans was the only one that retained its No. 3 position from the previous year. Starbucks (No. 7), Nugget Markets (No. 12) Whole Foods (No. 16), Stew Leonard’s (No. 26), and CarMax (No. 46) all jumped to higher positions on the list. Recreational Equipment (No. 34), Nordstrom (No. 36) and Publix (No. 91) had dropped from their previous spots.

The Container Store, which was included in the top ten in 2007, fell to the 20th position in 2008.

eBay, which did not appear on the 2007 list, was No. 68 in 2008.

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